23 - 29 March 2000

Mobile telephony moving "too slow"

JUANITO CAMILLERI, chief executive of Maltacom's mobile operator - Mobisle Communications Ltd. - is interviewed by Franco Aloisio.

Prof. Camilleri says that the pace of change in the telecoms sector is very fast. But things in Malta are still slow-moving, he argues.

Mobisle Communications Lt. has just signed a $24m contract with the international telecoms firm Nortel Networks to build the mobile telephony infrastructure for the company. What is the importance of this contract?

The contract with Nortel is a supply contract which positions Mobisle in the mobile phone market of the future. The contract will not only cover present day technology, but will help Mobisle gear up to future technology.

With a deal of this magnitude, one also looks at potential benefits to the country's economy such as the potential for job creation.

Nortel is an important firm which has come to Malta with its state-of-the-art technology. The company is seeing Malta as an opportunity to set up its own base in the Mediterranean regional market.

Independently of the agreement of Mobisle, Nortel was already making enquires about Malta through the MDC to set up a wireless application development centre.

Obviously the contract with Nortel is over a determined number of years and Mobisle will be seeking business partners to face future challenges which will emerge as a result of new forms of technology. Within next two three years, things will be changing radically.

Over these last months, there have been a lot of rumours on Maltacom's strategic partnership. Is the agreement with Nortel a step towards the establishment of a strategic partnership with Maltacom?

The issue of strategic partnership and take-over of shares is not for Maltacom to decide but it is the government's prerogative. Maltacom is growing into a telecoms conglomerate incorporating fixed, data service, internet and mobile services.

The agreement with Nortel does not constitute a strategic partnership. Generally speaking, entering into a partnership with someone who sells equipment is not necessarily a strategic move.

However, having said that, Maltacom's partnership could also take the form of another partial privatisation and could be done in one swipe. Another possibility is that Maltacom's subsidiaries are being sold separately.

In my opinion, one should be very careful when choosing a strategic partner for a group such as Maltacom. One should seek a partnership with an operator who has a wide experience in several operations. However this is the government's decision.

What is the state of the technical set-up of Mobisle?

The agreement with Nortel is very far reaching. It sees us through the first three years of operations and there are certainly other projects in the pipeline.

In fact, Nortel will be using Malta as a testing ground for UMTS. There is potential for further relations beyond these first three years. Things will change radically in the telecoms sector.

For the foreseeable future, the infrastructure which we will require is already present. We hope to start installing Nortel's equipment very shortly, pending the frequencies issue.

What is the situation with regards to this matter?

We hope to be in operation within six months. We do not know of any official response from the government.

There were various communications going on between Maltacom and the committee on the telecoms liberalisation, chaired by Minister Dalli. There were also various talks with Vodafone.

I believe the government is trying to find a holistic solution to the issue of the liberalisation of the telecoms arena.

As far as my company is concerned, we have been ready to go for a number of months. By this I mean that Mobisle has done what is necessary prior to obtaining the frequencies.

However there are still a number of tasks which have to be performed after the frequencies are granted.

Indeed the delay of frequencies has stretched too long and we are hoping that the frequencies will be granted very soon.

My aim is to launch the mobile service six months after the regulator passes on the frequencies to Mobisle. At the end of the day, we want to give the best service possible to the customers. We want to compete and be successful.

What has been the effect of the delay of the granting of frequencies on Mobisle?

Mobisle started operating in June 1999. The delay in issuing the frequencies to my company has had a tremendous negative effect. The effect on morale was significant. When I started in June, the aim was to launch the service in March 2000, that is, this month. We are now hoping that we will be given the frequencies by the end of the month.

The most frustrating thing was to revise our business plan due to the various delays in the issuing of the frequencies. Until recently there was doubt whether we will be given the licenses. However this has been clarified.

What are your views on the pace of the reforms in the telecoms sector?

The government has a very difficult juggling act in hand. There have been a number of events which have brought the situation we are in.

The liberalisation will have an effect on the present three key players: Maltacom, Vodafone and Melita Cable.

However in the future there will be other companies. In the future we will see new companies emerging in a scenario of mergers and buy-outs.

I believe the local market can sustain as many players as much as it wants. Moreover, one has to see Malta within the global telecoms market. We still have to sell the concept of Malta as a telecommunications hub.

The government's role, via the telecoms regulator, is a crucial factor in the liberalisation of this sector.

At present, certain things are not functioning as they should. For instance, it is totally unacceptable that I have to submit my tariffs to the regulator two months prior to launch, with the possibility of these tariffs being divulged. Moreover the office of the regulator has to be strengthened in view of the liberalised environment.

In my opinion, Maltacom cannot compete on a level playing field if the government remains the major shareholder in the company.

What will the effect on the mobile penetration and tariff rate once Mobisle is fully operative?

Everyone recognises that the rates in Malta are still very high. I see that rates will go down significantly once we enter the market. However, one has to say that the investment made by this company is not insignificant and hence there has to be a ratio that has to be struck between market penetration and price.

Vodaphone too will have to invest heavily to sustain its competitivity, and is already doing so.

Ultimately the company has to make money, apart from giving a good service. Technology in Malta is expensive and a lot of investment has to be made up-front. Hence companies have to see the investment coming back and hence we have to work harder. The risk is that targets are not met with the result that the latest technologies are not implemented because past technology is still being paid for.

Upon the launch of Mobisle, I would expect prices not to be a cent more than the international European benchmarks.

After the first year of operation, I would expect prices to go down by 50 per cent, within the range of international rates. This would be coupled by an increased market penetration. At present, Vodafone has 10 per cent penetration rate going into 11 per cent.

This contrasts sharply with the fact that certain countries have a penetration rate of more than 50 per cent. In Italy, for instance, there are more mobile phones than fixed line telephone sets.

You have moved into a new modern building in Marsa, which will be centre of all operations of Mobisle. How many people have been recruited so far and what will be size of the workforce once the company starts operations?

So far, we have recruited 35 persons and we are aiming for a total workforce of 100, depending on how business will develop.

The nature of the business we will be launching will not just be mobile telephony. We are very happy in our new premises and the company is looking forward to the new challenges.

Once Mobisle will be fully operational in the market, will customers have to change their mobile sets to subscribe to the new service being offered by your company?

Given that one has a dual band mobile phone, one can have access to both the service of Mobisle and Vodafone. What links one's mobile set to the operator is the SIM card.

One can get into a particular network via the SIM card. Problems will arise on customers who are still on an ETACS mobile set or a

single-band set.